Yen collapses against all currencies due to actions of Bank of Japan
2023.01.13 05:17
Yen collapses against all currencies due to actions of Bank of Japan
By Kristina Sobol
Budrigannews.com – The yen surged to seven-month highs and Japanese bond yields breached a central bank target on Friday as investors questioned the central bank’s commitment to loose monetary policy. Both of these developments contributed to Friday’s rise in world stock markets to one-month highs.
While Asian-Pacific shares outside of Japan reached a new seven-month high and were on track for a third week in a row of gains, European shares opened higher and the broad index reached its highest level since April.
Futures on U.S. stocks predicted a weaker opening for Wall Street, but sentiment was generally upbeat a day after data showed that price pressures in the United States were decreasing further.
As the yen shot up and benchmark 10-year government bond yields breached the BOJ’s 0.5% ceiling, Japan stole the spotlight from the market. There was a rumor that the BOJ’s yield curve control policy might be changed or even scrapped as soon as the policy meeting next week.
The yield was brought back under control by an emergency buying spree by the BOJ, but markets remained volatile.
Since the BOJ shocked markets by widening the band around its 10-year government bond (JGB) yield target, the yen has gained 6% in just over three weeks, reaching its highest level since late May at 128.11 per dollar.
Bets on a forthcoming departure from ultra-easy policy, which aims to keep yields close to zero, have increased in response to a newspaper report that raises the possibility of greater flexibility. The BOJ stated that it would buy more outright bonds on Monday, which should keep yields in check.
Naka Matsuzawa, chief Japan macro strategist for Nomura, stated, “I think it’s too early for the BOJ to give up.” The 0.5% yield cap can still be defended with ammunition.
Reuters was told by people who know what the BOJ is thinking that the bank will probably raise its inflation forecasts next week and talk about whether or not it needs to take any more action.
Market sentiment was dominated, outside of Japan, by overnight data on December inflation in the United States that roughly met expectations. From 7.1% in November, headline consumer price increases slowed to 6.5 percent in December.
As a result, investors decreased their expectations for U.S. interest rates. Futures markets are pricing in rate cuts later this year, so it is now anticipated that the Federal Reserve will raise interest rates by 25 basis points rather than 50 next month.
In light of this, the MSCI World Stock Index rose to a one-month high and was poised for its biggest weekly gain in two months.
According to Nordea Chief Analyst Jan von Gerich, “These latest U.S. (inflation) numbers support the view that the Fed is moving towards 25 bps rate hikes and that is offering consolation to the equity markets.”
U.S. Treasuries rose, and the dollar fell broadly.
The yield on the decreased to 3.418%, the lowest level since December 7.
The risk-averse Australian dollar reached a roughly five-month high of $0.6994, while the euro soared to a nine-month high of $1.0868.
Sterling gained 0.25 percent against the dollar as a result of the news that Britain’s economy unexpectedly experienced some modest growth in November.
Oil gained overnight, helped along by optimism regarding China’s reopening. At the time of writing, futures were up about 0.4 percent at $84.33. O/R] In another area, the central bank of South Korea raised its policy interest rate by 25 basis points on Friday, as anticipated, and economists now believe that it may have completed its cycle of raising rates.
More Yield on Japan’s benchmark 10-year government bonds has updated new high
